Iranian Foreign Minister Manouchehr Mottaki spoke of “serious progress” in Iran’s relations with Armenia and called for their further expansion in an interview published on Thursday.

“In its foreign policy, Iran attaches great importance to the development of relations with neighboring states, and Armenia occupies a special place in this context,” he told the PanArmenian.net news service. “Serious progress has been registered in Armenian-Iranian relations and the economic sphere in particular.”

Mottaki cite more joint commercial projects devised by the two governments. In particular, he confirmed that they have reached “final agreements” to build a major hydroelectric station on the Arax river marking the Armenian-Iranian border and a third high-voltage transmission line linking the two countries’ power grids.

Armenian Energy Minister Armen Movsisian said in July that work on these two projects as well as the planned construction of a pipeline that will pump Iranian fuel to Armenia will get underway by the end of this year.

Mottaki said that Tehran and Yerevan should go further and negotiate a free trade deal. “Considering the fact that there are presently no constraints on the expansion of our cooperation, we need to take concrete steps such as the elaboration of an agreement on a free trade zone and privileged tariffs, which would help to elevate our relations to the proper level,” he told PanArmenian.net.

The chief Iranian diplomat also reaffirmed his government’s stated readiness to assist and even mediate in a peaceful resolution of the Nagorno-Karabakh conflict. But Iran “could only complement other efforts in this direction,” he cautioned in an apparent reference to the mediating efforts of the OSCE Minsk Group co-headed by the United States, Russia and France.

Mottaki pointed out at the same time that “regional conflicts should be settled by regional countries.” He did not specify whether that means Tehran is opposed to U.S. involvement in the Karabakh peace process.

Iran’s ambassador to Armenia, Seyed Ali Saghaeyan, made clear in June that the Islamic Republic is categorically against any U.S. participation in a multi-national peacekeeping force that would presumably be deployed around Nagorno-Karabakh after the signing of an Armenian-Azerbaijani peace accord.